The Real Reasons Why Brands Like GM Still Don't Like Facebook Advertising

Robert Hof
, ContributorI cover the collision of advertising and the Internet.Opinions expressed by Forbes Contributors are their own.

There's a curious disconnect plaguing Facebook in the run-up to its initial public offering this week: Just about every marketer knows she or he has to be on Facebook to reach its nearly 1 billion users, which is why ad spending on the social network nearly doubled last year. But even as they write Facebook checks, those same marketers invariably confess that they're unsure what they're getting from all that spending--in particular whether Facebook ads ultimately push more products off store shelves.

The news comes as a survey also shows more than half of Facebook users don't feel safe buying on Facebook. Both developments threaten to mute investor interest in Facebook's IPO, for which reports so far had indicated strong demand. And that IPO is just a couple of days away.

A lot of pundits are quick to blame Facebook for what they assume is a failed ad platform. Well, some $5 billion in revenues this year is a "failure" nearly every other website and publisher would love to have. And some marketers (truth be told, many, even automakers) still like what they're getting on Facebook. At the same time, though, Facebook's ad offerings still leave much to be desired, especially for brand marketers, and so do its methods of measuring the impact of those ads.

But the biggest challenge is one that is as old as media itself: Social media is, well, a new medium. Television ads that consisted of video of people reading radio ads didn't work too well, but the 30-second image ad sure did. Magazine ads plastered on websites didn't work too well either, but Google's search ads sure do.

Likewise, Facebook, and others in social media such as Twitter, Pinterest, StumbleUpon and even Google with its YouTube service, have yet to come up with the 21st century equivalent of the 30-second TV ad. Indeed, they haven't come up with anything to rival the search ad, a click on which remains the most powerful statement in advertising history of a consumer's intent to buy. "There is still a fundamental disconnect between what people are doing on Facebook and what marketers want from them," says Kurt Abrahamson, CEO of ShareThis, which helps advertisers reach target audiences through content sharing buttons on many websites. "Whether Facebook can become the brand mecca they want to be remains to be seen."

Facebook's Sponsored Stories, which are existing posts about a brand that advertisers pay to spread more widely on Facebook, are a first attempt at an ad format more suited to social media. And they've apparently done well so far. As I wrote in my Forbes story last December:

It’s ... converting the primary gesture of social media—sharing—into something potentially even better for branding than TV ads: a supercharged version of word of mouth. It’s the most valuable form of marketing but tough to build quickly and even tougher to control.

Facebook demolishes those limitations. People have an average of 130 Facebook friends, so when they “Like” a brand that endorsement spreads instantly to the news feeds of many of those friends—who then may spread it further to their friends, potentially building to millions of people in a flash. Mars Chocolate North America, for instance, seeded demand before last year’s launch of M&M’s Pretzel by offering samples through a virtual vending machine to 40,000 fans, who each could spread the offer to two of their friends. In less than 48 hours 120,000 samples flew out the door.

Still, the impact of such campaigns is relatively small next to TV ad campaigns that can reach far more people at a single shot, often with much more emotional resonance. Indeed, marketers say Facebook ad units still leave little room to establish an emotional connection with consumers. Despite some findings that Facebook's ads do just that through social connections rather than glitz, many marketers want both capabilities in Facebook ads. “Facebook needs to come up with something more beautiful,” Cory Treffiletti, cofounder of digital marketing firm Amplify Social, said in the same story.

The other issue for Facebook is providing better measures of the impact of its advertising--especially as it gets more expensive. It has made some strides there, leading an initiative with Nielsen to provide metrics similar to the Gross Ratings Points used in television. But the effort is early, and marketers still want more. "Brands are experimenting on social media to see what's most effective, and what metrics best measure that," says Jonathan Weitz, a partner with the boutique media consulting firm Interactive Broadband Consulting Group.

In particular, it's harder for marketers to track the impact of an ad through to an actual sale than with other websites. That's because Facebook limits how they can track people's activities on Facebook, and they can't directly track those users when they leave Facebook, as they can with other websites, with browser software called cookies. "Brands are looking at their investment in Facebook and seeing if they're getting ahead of themselves," says ShareThis' Abrahamson. "They're having trouble tracking it to economic results."

Not least, marketers themselves may need to change how they operate on social networks, just as they had to adapt their messaging to television and the Web. As I wrote during Facebook's Marketing Conference in February:

Marketers brought up onstage to support Facebook’s vision couldn’t help but mention challenges. Nigel Morris, CEO of Aegis Media North America, noted that there’s a “dramatic” shortage of talent to carry out the new marketing, and a lack of understanding by management as well.

The problem, notes Bryan Wiener, CEO of digital agency 360i, is that much of the marketing industry is separated into distinct siloes for advertising, public relations, and Web site creation and operations. “The industry is not set up to support the new world order,” he says. “Facebook is making it incredibly difficult for these companies” as a result. Facebook’s vision, he adds, is going to require big disruptions in the way marketers and their agencies work.

So it's likely that if Facebook is to fulfill the huge expectations inherent in its $105 billion IPO, it will have to market itself to the marketers better as well. After all, Randall Rothenberg, CEO of the online ad trade group Interactive Advertising Bureau, noted at a marketing conference today, "95% of brand dollars are staying out of digital advertising" because it's mainly aimed at eliciting a direct sale rather than improving brand metrics like brand lift and intent to buy. His prescription: Come up with "better space and places and opportunities for brand expression," in particular ad units that are more standardized across social sites, not specific just to Facebook.